Lawyers say compromise agreements ‘unenforceable’ under Equality Act


Employment lawyers have expressed concern at ambiguities in the Equality Act, which came in to force this month, that could have far-reaching implications for the use of compromise agreements between employers and employees.

Section 147 of the Act sets out the requirements needed to have a qualifying compromise contract to settle claims arising under the Act. One of these is that the complainant must receive advice from an “independent adviser” about its terms and effect. However, this means that a solicitor who was instructed by the employee prior to the production of the final agreement for consideration will be precluded from acting any further.

The Law Society released a statement yesterday indicating that, “a solicitor who was instructed by the employee prior to the production of the final contract for consideration; or who has acted in any way for the employee during the course of his complaint – even in a supporting role to the lead adviser perhaps as holiday cover – will be precluded from acting any further as an independent legal adviser in that compromise contract.”

Legal blogger Laurie Anstis, an associate at Boyes Turner, said: “Since any lawyer consulted by the employee might be said to be acting for them, this leads to the absurd conclusion that there is no lawyer who can validly count as an independent adviser. Immediately they start to advise the employee, they will be ‘acting for’ the employee and no longer independent.”

According to the guidance issued by The Law Society, “The effect of this is that there is no way in which compromise agreements under the Equality Act can be made enforceable.”

Anstis added that the potential impact of this ambiguity has not yet hit, saying: “Practically speaking, this is not yet as big a deal as it might be, as most compromise agreements currently being dealt with would have blown up before the Act. However, soon we will be dealing with cases entirely under the new Act, and that is when things will get difficult.”

Anstis suggested that there could now follow a period of uncertainty while the matter is clarified, and this could continue even if the Act is redrafted. He said: “This is an Act, and it might require another Act to put it right. It could be months before it is resolved.”

Compromise agreements and
the Equality Act 2010

Consultant editor Darren Newman explains why the drafting of the provision in the Equality Act 2010 on compromise agreements could effectively mean that no compromise agreement under the Act is enforceable.

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Employment law expert Darren Newman said the issue could have implications that reach further than equality alone, and pointed out that any settlement that requires a compromise agreement would be affected.

He said: “The problem might be that employers and employees who want to settle their claims simply have no confidence in compromise agreements.

“The implications go far beyond pure discrimination claims. Almost every compromise agreement refers to discrimination as well as to unfair dismissal and other potential claims. If employers agree to make a payment to an employee being dismissed, will they accept a compromise agreement that covers unfair dismissal and redundancy but which can’t rule out a discrimination claim?”

The Law Society has requested a meeting with the Government Equalities Office to consider how this question can be resolved and has notified the Home Secretary of its concerns.

A spokesman for the Government Equalities Office responded: “The GEO and its legal team do not agree with the Law Society’s interpretation of section 147(5) of the Equality Act 2010.  However, we are aware of the Law Society’s concerns and are continuing to discuss the issue with them.”


Article updated at 08:54 on 1 November 2010. Statement from Government Equalities Office added.

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